Banks to reduce home loan rates in September

Four of Japan’s major banks announced that they will be reducing interest rates on new home loans this month.

The Bank of Tokyo-Mitsubishi UFJ will reduce the prime rate on their 10-year fixed-rate home loan by 0.05 points to 0.75%. Mitsui Sumitomo Banking Corporation, Mizuho Bank and Resona Bank will also reduce the rates on their 10-year fixed-rate loans by 0.05 points. Sumitomo Mitsui Trust Bank will leave their rates at their current level of 0.70%.

10-year fixed-rates (prime rates):

  • Bank of Tokyo-Mitsubishi UFJ: 0.75%
  • Mizuho Bank: 0.80%
  • Resona Bank: 1.05%
  • Mitsui Sumitomo Banking Corporation: 1.05%
  • Sumitomo Mitsui Trust Bank: 0.70%

 

The decrease reflects a drop in Japan’s 10-year government bond yield which currently sits at 0.005%, down from a recent high of 0.100% in July. Last week the yield reached into negative territory for the second time since late 2016, spurred on by investors seeking a safe haven amidst uncertainty following tensions with North Korea and the US political climate.

Fixed-term interest rates offered on home loans typically follow movements in the 10-year government bond yield.

The 35-year fixed-rate ‘Flat 35’ base interest rate will also decrease this month for the first time in 4 months. The minimum fixed interest rate on a 21 ~ 35 year loan with an LTV of below 90% and a loan amount of less than 80 million Yen will decrease by 0.04 points from August to 1.08%. Flat 35 interest rates were as high as 3.0% in early 2009.

Sources:
The Nikkei Shimbun,
NHK, September 1, 2017.